Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Nvidia Numero Uno in Count Down to President Donald Pump Election Victory - 5th Nov 24
Trump or Harris - Who Wins US Presidential Election 2024 Forecast Prediction - 5th Nov 24
Stock Market Brief in Count Down to US Election Result 2024 - 3rd Nov 24
Gold Stocks’ Winter Rally 2024 - 3rd Nov 24
Why Countdown to U.S. Recession is Underway - 3rd Nov 24
Stock Market Trend Forecast to Jan 2025 - 2nd Nov 24
President Donald PUMP Forecast to Win US Presidential Election 2024 - 1st Nov 24
At These Levels, Buying Silver Is Like Getting It At $5 In 2003 - 28th Oct 24
Nvidia Numero Uno Selling Shovels in the AI Gold Rush - 28th Oct 24
The Future of Online Casinos - 28th Oct 24
Panic in the Air As Stock Market Correction Delivers Deep Opps in AI Tech Stocks - 27th Oct 24
Stocks, Bitcoin, Crypto's Counting Down to President Donald Pump! - 27th Oct 24
UK Budget 2024 - What to do Before 30th Oct - Pensions and ISA's - 27th Oct 24
7 Days of Crypto Opportunities Starts NOW - 27th Oct 24
The Power Law in Venture Capital: How Visionary Investors Like Yuri Milner Have Shaped the Future - 27th Oct 24
This Points To Significantly Higher Silver Prices - 27th Oct 24
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Stock Market Melt-up, Then Down in 2014

Stock-Markets / Stock Markets 2014 Dec 24, 2013 - 10:51 AM GMT

By: Clif_Droke

Stock-Markets Market events such as crashes and panics are thought by economists to be random, unpredictable events. To the contrary, such events are nothing if not predictable and often arrive with recognizable regularity. A cursory examination of the last few decades will prove this to be conclusive.

Writing in Barron’s, Randall Forsyth pointed out that each cycle of 40-years plus “has been marked by blowups.” He cited the following debacles: Penn Central (1970), Herstatt Bank (1974), the Hunt Brothers (1980), the October 1987 crash, the S&L crash (1990), the mortgage securities and Mexican crises of 1994, the emerging-market debt crises of 1997-98, the dot-com crash of 2000, and the housing crash of 2007-08.


“Two things stand out” from these crises, writes Forsyth: “The calamities escalated in scale. And each came during or at the end of a tightening cycle by the Federal Reserve.”

Forsyth’s observation that financial crises have increased in magnitude since circa 1974 is a testament to the increasing strength of the “winter” phase of the Kress 120-year cycle. The periodic market crashes of each decade since the 1970s have progressively worsened due to this acceleration of deflationary pressure exerted by the long cycle.

The 120-year cycle is a composite cycle, which means it has multiple components. Arguably the most dominant of these components is the 40-year cycle. There are three such 40-year cycle bottoms within a complete 120-year cycle. Each previous 40-year cycle was accompanied by a significant market event or economic crisis. It would be highly irregular if 2014 didn’t witness a discernible setback of some sort with the 40-year cycle bottoming later next year.

Incredible as it may sound, we’re one of the lucky few generations that get to witness the momentous changes wrought by the 120-year cycle bottom. The discoverer and exponent of this cycle, Samuel J. Kress, called it the Revolutionary Cycle. This long-term cycle of inflation/deflation is always characterized by revolutionary changes, either social or economic in nature, and the last such generation to witness a revolutionary cycle bottom was in the 1890s. It was that generation that saw the revolutionary change in the U.S. away from an agrarian economy and towards an industrial one.

Financial and economic crises typically set the stage for social and political changes of a revolutionary character. It isn’t for naught that the 120-year cycle is known as the Revolutionary Cycle.

The late Mr. Kress fervently believed that the upcoming 120-year cycle bottom in late 2014 would witness the demise of free market capitalism and the beginnings of a full-fledged socialist political revolution in the U.S., and he wrote extensively concerning this. With the upcoming implantation of State-mandated universal health coverage – right on schedule in 2014 – it would seem that Mr. Kress’ prediction was on target.

The set-up for a market melt-down in 2014 as the 120-year cycle bottom draws closer is the developing “melt-up” in the weeks and months ahead. Pushed higher by a floodtide of share buybacks and concentrated institutional buying interest in a select few shares, the major indices have defied the bearish pronouncements of analysts and letter writers for most of 2013. With their backs to the wall, these erstwhile bears are slowly admitting defeat and have begrudgingly joined the ranks of the bulls. This trend will likely accelerate into 2014 before the market encounters turbulent waters later in the year.

When there is near unanimity of opinion about the stock market’s direction, the bulls will be faced with a serious challenge. A one-sided, bull-dominated stock market is a top-heavy one and is quite vulnerable to unexpectedly bad news. The bad news for 2014 could be an anticipated hike in the Fed funds rate, an economic slowdown in China or trouble in euro land. This is when the downside pressure of the long-term cycle bottoming will inflict maximum damage.

On the institutional front, Goldman Sachs analyst David Kostin is one of the very few dissenters from the super-bullish consensus among analysts making 2014 forecasts. He rightly points out that the market hasn’t suffered a serious decline in two years and is ripe for one in 2014. “We had a 40% rally in the past 18 months with no correction,” he recently told Barron’s. “It’s hard to identify why, but an increased probability of a correction next year is worth emphasizing.” Unlike most Wall Street institutions, Goldman tends to be on the leading edge of critical market junctures.



Also worth noting is the research by Ned Davis which shows that mid-term election years (i.e. the second year of a presidential term) show an average decline of 21% going back to 1934. “But,” adds Davis,” “after the low was hit in those years, the market, on average, gained 60% over two years. So a correction [in 2014] should be followed by a great buying opportunity.” This assessment jibes with the 120-year Kress cycle view which suggests a major bounce-back following the cycle’s bottom in late 2014.

For now the bulls still carry the day on Wall Street. Look for this state of affairs to reverse at some point in 2014 after the last of the bears have capitulated and joined the bulls. Indeed, the anticipated revolutionary changes produced by the upcoming 120-year cycle bottom may well begin with a revolutionary change in Wall Street’s sentiment profile.

High Probability Relative Strength Trading

Traders often ask what is the single best strategy to use for selecting stocks in bull and bear markets. Hands down, the best all-around strategy is a relative strength approach. With relative strength you can be assured that you're buying (or selling, depending on the market climate) the stocks that insiders are trading in. The powerful tool of relative strength allows you to see which stocks and ETFs the "smart money" pros are buying and selling before they make their next major move.

Find out how to incorporate a relative strength strategy in your trading system in my latest book, High Probability Relative Strength Analysis. In it you'll discover the best way to identify relative strength and profit from it while avoiding the volatility that comes with other systems of stock picking. Relative strength is probably the single most important, yet widely overlooked, strategies on Wall Street. This book explains to you in easy-to-understand terms all you need to know about it. The book is now available for sale at:

http://www.clifdroke.com/books/hprstrading.html

Order today to receive your autographed copy along with a free booklet on the best strategies for momentum trading. Also receive a FREE 1-month trial subscription to the Momentum Strategies Report newsletter.

By Clif Droke

www.clifdroke.com

Clif Droke is the editor of the daily Gold & Silver Stock Report. Published daily since 2002, the report provides forecasts and analysis of the leading gold, silver, uranium and energy stocks from a short-term technical standpoint. He is also the author of numerous books, including 'How to Read Chart Patterns for Greater Profits.' For more information visit www.clifdroke.com

Clif Droke Archive

© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in